Nc: 2024:Khc:40057-Dbita v. On The Other Hand, Learned Counsel For The Revenue Submits That He Be Granted Liberty To Revive The Appeal In Case The Matter Falls Within The Exceptions Under

Digitally signedby BHARATHISLocation: HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25 DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO.456 OF 2022 BETWEEN: 1. PR. COMMISSIONER OF INCOME TAX, BMTC COMPLEX, INCOME TAX, BMTC COMPLEX, KORAMANGALA, BANGALORE. 2. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), BANGALORE. BANGALORE. …APPELLANTS (BY SRI. SANMATHI E.I., ADVOCATE) AND: M/S. RAKON INDIA PVT. LTD., NO.12, KHB INDUSTRIAL AREA, YELAHANKA NEW TOWN, BANGALORE-560 106. …RESPONDENT (BY SMT. TANMAYEE RAJKUMAR, ADVOCATE) THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 01/11/2021 PASSED IN ITA NO.1964/BANG/2017 FOR THE ASSESSMENT YEAR 2009-2010 PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HONBLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 01/11/2021 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN ITA NO. 1964/BANG/2017 FOR ASSESSMENT YEAR 2009-2010 (ANNEXURE-A) AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. THIS APPEAL, COMING ON FOR FURTHER ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT) Heard the learned counsel Sri. Sanmathi.E.I., for appellants/Revenue and Smt. Tanmayee Rajkumar, learned counsel for the respondent/assessee. 2. The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short ‘the Act’) questioning the correctness and legality of order dated 01.11.2021 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short ‘Appellate Authority’) in ITA.No.1964/Bang/2017 for the assessment year 2009-10, raising the following substantial questions of law: I. "Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified in seeking exact comparability while searching for comparable companies of the assessee under TNMM method whereas requirement of the law and international jurisprudence require seeking similar comparable companies?" II. "Whether the order of the tribunal in rejecting comparables M/s Valiant Communication Ltd and M/s Chemtrols Industries Ltd. by insistence on strict comparability under TNMM defeats the very purpose of the law relating to determination of ALP under income Tax Act?" III. "Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified in treating the foreign currency fluctuations as operating in nature, ignoring the fact that the foreign currency fluctuations are non operating in nature as per Income Tax Rule 10 TA?" IV. "Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified in comparing the margins of the assessee and the comparable after excluding depreciation to arrive at correct comparability. Ignoring the fact that depreciation is an integral part of business operation in manufacturing industry?" V. "Whether on the facts and in the circumstances of the case, can the order passed by Tribunal be said as perverse in nature since Tribunal has directed the Transfer Pricing Officer to exclude or include certain comparable's which are chosen by the said officer in accordance with parameters set out in section 92 and Rules framed thereunder"? IV. "Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified in comparing the margins of the assessee and the comparable after excluding depreciation to arrive at correct comparability. Ignoring the fact that depreciation is an integral part of business operation in manufacturing industry?" V. "Whether on the facts and in the circumstances of the case, can the order passed by Tribunal be said as perverse in nature since Tribunal has directed the Transfer Pricing Officer to exclude or include certain comparable's which are chosen by the said officer in accordance with parameters set out in section 92 and Rules framed thereunder"? 3. Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes. It is also submitted that the aforesaid Circular binds the revenue. 4. On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024. - 5 - 5. In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding. Sd/- (S.G.PANDIT) JUDGE Sd/- (C.M. POONACHA) JUDGE SMJ